Full Judgment Text
2024 INSC 918
Reportable
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
Criminal Appeal No (s). of 2024
(@ Special Leave Petition (Crl.) No. 2696 of 2024)
Bijay Agarwal
….Appellant(s)
Versus
M/s Medilines
….Respondent(s)
With
Criminal Appeal No(s). of 2024
(@ Special Leave Petition (Crl.) No. 2695 of 2024)
J U D G M E N T
C. T. Ravikumar, J.
Leave granted.
On the consent of the parties, the matter was
finally heard.
1. The captioned appeals by a special leave are
directed against the impugned common order dated
09.01.2024 passed by the High Court of Karnataka at
Bengaluru in Criminal Petition Nos. 13095 of 2023 and
13153 of 2023 respectively.
Signature Not Verified
Digitally signed by Dr.
Naveen Rawal 2. Heard the learned senior counsel appearing for
Date: 2024.12.02
16:05:38 IST
Reason:
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the appellant and the learned counsel appearing for the
respondent.
3. In view of the factual background obtained in
these cases, a question of seminal importance arises for
consideration viz., “whether the signatory of a cheque
authorized by the Company is a drawer and whether
such a signatory could be directed to deposit any sum
out of the fine or compensation awarded by the trial
Court under Section 148 of the Negotiable Instruments
Act, 1881 (for short ‘NI Act’)”, as a condition for
suspending the sentence in an appeal filed against his
conviction under Section 138 of the NI Act?
4. The contention of the appellant is that he is only an
authorized signatory of the company M/s. Gee Pee
Infotech Private Limited, which was held liable to
adequately compensate the complainant company by
the trial Court. The status of the appellant authorised
signatory of the aforesaid company is undisputed
rather, it is indisputable as it is the very case of the
respondent complainant. Before the trial Court the said
company was the first accused and the appellant herein
was the second accused. In unambiguous terms, the
respondent-complainant described the appellant Sri.
Bijay Agarwal as the authorized signatory/ Director of
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M/s. Gee Pee Infotech Pvt. Ltd.
5. Bearing in mind the said indisputable and
undisputed fact, we will briefly refer to the other
relevant facts of the case.
The complaint being C.C. No. 13938 of 2013 was
filed by the respondent company against M/s. Gee Pee
Infotech Private Ltd. and appellant, under Section 138 of
the NI Act. The crux of the complaint was as under: -
The Accused No.1 is a Company incorporated
under provisions of Companies Act 1956. The
second accused is an authorised
signatory/Director of the first accused company
and he is incharge and responsible for the day
today administrative affairs and functioning of
the accused No.1 Company. The accused by
representing that they are the Pan Indian circle
licence holder for distribution of Electronic Pin
Recharge BSNL, induced the complainant to pay
advance amount of Rs.1,00,00,000/- and to
become the Master Distributor for BS recharge
pin for Karnataka State and accordingly entered
in agreement with the complainant on
01/10/2011. By virtue of said Agreement, the
accused appointed the complainant Master
Distributor for BSNL E-recharge pin for
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Karnataka and collected the advance payment
while undertaking liquidate/transfer BSNL E-
recharge pin load to the complainant as to
enable them to distribute through their
constituents of the State of Karnataka. After
entering into the Agreement accused supplied
certain BSNL E-recharge pin to the complainant.
However, to their utter shock, surprise and
dismay, it came to the knowledge of the
complainant through their constituents that 99%
of the BSNL E-recharge pin supplied by the
accused are fake and the talk time under the
said BSNL E-recharge load supplied to them
could not be uploaded to the Mobile Numbers
of the customers.
6. It was the further case that on being told that
appropriate action would be initiated they executed a
Memorandum of Understanding on 10.04.2012 and
assured return of the amount advanced and issued five
post-dated cheques. The cheque presented was
dishonoured and thereupon the complainant caused
legal notice. Pursuant to the same, the accused issued
two fresh post-dated cheques each for a sum of Rs.25
lakhs in lieu of the old cheques. Later, cheque bearing
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No.955437 dated 24.04.2013 for a sum of Rs.25 lakhs was
presented, but dishonoured and returned with the
endorsement “payment stopped by the drawer”. The
complaint was, thereupon, filed after complying with the
requisite procedures and was taken on file as C.C.
No.13938/2013
7. After appreciating the evidence, the trial Court
arrived at the following finding as against issue No.2:
32. Point No.2:- Complainant Company paid a
sum of Rs. 1,00,00,000/- to the accused
Company for purchasing BSNL E recharge pins
but was supplied fake E-recharge pins which
the complainant Company demanded
repayment, the accused not be uploaded to the
Mobile numbers of the customers. W a sum of
Rs.50,00,000/- and for the balance Company
repaid amount it issued the cheque in question
which came to be dishonoured on presentation.
Complainant Company has been deprive of its
money for all these years, i.e. for a period of
more than years. Hence, accused Company
shall adequately compensate the complainant
for the same.
8. As relates the latter appeal, the complaint that was
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taken on file as C.C. No.13937/2013 was filed pursuant
to the dishonour of cheque No.955421 dated 24.12.2012
for a sum of Rs. 25 lakhs under similar circumstances.
On appreciating the evidence the trial Court, as per a
separate order passed on 30.09.2023 itself arrived at
similar conclusion as in C.C. No.13938/2013.
9. Based on the aforesaid conclusions, in both the
cases the trial Court found the appellant guilty and
accordingly convicted and sentenced, as per judgment
and order dated 30.09.2023 as under: -
“Accused is found guilty of the offence
punishable U/Sec. 138 of Negotiable
Instruments Act 1881.
Acting U/sec. 255(2) of Cr.PC accused is
hereby convicted for the offence punishable
U/Sec. 138 of Negotiable Instruments Act 1881
and he is sentenced to pay to pay fine of Rs.
40,00,000/-.
In default, accused shall undergo simple
imprisonment for a period of six months.”
10. Feeling aggrieved by the conviction and sentence
passed in C.C. No.13937/2013, the appellant preferred
Criminal Appeal No.1536/2023 and against the
conviction and sentence passed in C.C. No.13938/2013
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filed Criminal Appeal No.1537/2023, before the
Principal City Civil and Sessions Judge Court at
Bangalore. In the appeals, the appellant herein filed
separate applications and sought for suspension of
sentence passed in both the cases, under Section 389 of
the Cr.PC. Separately, but on the very same lines
orders were passed in both the appeals on 10.11.2023.
The sentence was suspended with condition to deposit
20% of the fine/compensation amount in each of the
appeals. It is against the said direction to deposit 20%
of the compensation amount that the appellant
approached the High Court by filing Criminal Petition
Nos.13095/2013 and 13153/2013 seeking that part of the
order dated 10.11.2023 requiring deposit of fine be
quashed, which culminated in the impugned common
order dated 09.01.2024.
11. Now, the self-same appellant raised the contention
in both the appeals that in the light of the decision of
this Court in Shri Gurudatta Sugars Marketing Pvt. Ltd.
1
Vs. Prithviraj Sayajirao Deshmukh & Ors. , he could
not have been directed to pay any amount payable
under Section 148 (1) of the NI Act, for this Court laid
down the law that merely because an officer of a
1
(2024) SCC OnLine SC 1800
Page 7 of 19
company being the authorised signatory of the cheque
by itself would not make him its drawer. It is submitted
that though the said decision was dealing with Section
143A of the NI Act in view of its analogicalness to
Section 148, NI Act, the dictum laid down in the said
decision is to be followed as relates Section 148 as well
and hence, an authorized signatory of an accused
company not being the drawer of the cheque could not
be directed to deposit any particular percentage of the
fine or compensation awarded by the trial Court under
Section 148, NI Act. The learned counsel for the
respondent resisted the contention and canvassed for
the dismissal of the appeals. According to the learned
counsel, the exposition of law in the decision in Shri
Gurudatta Sugars Marketing Pvt. Ltd. case (supra) is
inapplicable in the cases on hand.
12. To appreciate rival contentions, it is only
appropriate to refer to Sections 143- A and 148 of the NI
Act: -
“S.143 – A. Power to direct interim
compensation – (1) Notwithstanding
anything contained in the Code of Criminal
Procedure, 1973 (2 of 1974), the Court
trying an offence under Section 138 may
order the drawer of the cheque to pay
interim compensation to the complainant-
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(a) in a summary trial or a summons
case, where he pleads not guilty to
the accusation made in the
complaint; and
(b)in any other case, upon framing of
charge.
(2) The interim compensation under sub-
section (1) shall not exceed twenty per
cent of the amount of the cheque.
(3) The interim compensation shall be
paid within sixty days from the date of the
order under sub-section (1), or within such
further period not exceeding thirty days as
may be directed by the Court on sufficient
cause being shown by the drawer of the
cheque.
(4) If the drawer of the cheque is acquitted,
the Court shall direct the complainant to
repay to the drawer the amount of interim
compensation, with interest at the bank
rate as published by the Reserve Bank of
India, prevalent at the beginning of the
relevant financial year, within sixty days
from the date of the order, or within such
further period not exceeding thirty days as
may be directed by the Court on sufficient
cause being shown by the complainant.“
“S.148. Power of Appellate Court to order
payment pending appeal against
conviction.
(1) Notwithstanding anything contained in
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the Code of Criminal Procedure, 1973 (2 of
1974), in an appeal by the drawer against
conviction under Section 138, the
Appellate Court may order the appellant to
deposit such sum which shall be a
minimum of twenty per cent of the fine or
compensation awarded by the trial Court:
Provided that the amount payable
under this sub-section shall be in addition
to any interim compensation paid by the
appellant under Section 143-A.”
(Underline supplied)
13. A scanning of Sections 143A and 148 would reveal
that the former deals with the power of the Court trying
an offence under Section 138 of the NI Act to direct the
drawer of the cheque to pay interim compensation to
the complainant whereas the latter Section deals with
the power of the Appellate Court in an appeal by the
drawer against the conviction under Section 138 to the
appellant to deposit such sum which shall be a
minimum of 20% of the fine or compensation awarded
by the trial Court. The proviso to Section 148(1) would
further reveal that the amount payable thereunder shall
be in addition to any interim compensation paid by the
appellant under Section 143A, NI Act. Thus, a scanning
of both the Sections would reveal that the said sections
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empower to issue such directions only to the ‘drawer’ of
the cheque. We have already noted that in ‘ Shri
Gurudatta Sugars Marketing Pvt. Ltd.’ Case ( supra ) after
referring to the earlier decisions of this Court including
2
in ‘ K.K. Ahuja v. V.K. Vohra and Another ’ , and in ‘ N.
Harihara Krishnan v. Godfather Travels and Tours P.
3
Ltd. ’ , this Court held that the primary liability for an
offence under Section 138 lies with the company and
the company’s management is vicariously liable only
under specific conditions provided in Section 141 and
for the purpose of Section 143A of the NI Act and a
signatory merely authorised to sign on behalf of the
company would not become the ‘drawer’ of the cheque
and, therefore, could not be directed to pay interim
compensation under Section 143A. In the contextual
situation, it is relevant to refer to paragraphs 28 to 30,
34 and 35 of ‘ Shri Gurudatta Sugars Marketing Pvt. Ltd. ’s
case to the extent it is relevant for the purpose of this
case, as under: -
“28. The High Court's interpretation of section 7
of the Negotiable Instruments Act, 1881
accurately identified the "drawer" as the
individual who issues the cheque. This
2
(2009) 10 SCC 48
3
(2018) 13 SCC 663
Page 11 of 19
interpretation is fundamental to understanding
the obligations and liabilities under Section 138
of the Negotiable Instruments Act, 1881, which
makes it clear that the drawer must ensure
sufficient funds in their account at the time the
cheque is presented. The appellants' argument
that directors or other individuals should also
be liable under Section 143A misinterprets the
statutory language and intent. The primary
liability, as correctly observed by the High
Court, rests on the drawer, emphasizing the
drawer's responsibility for maintaining sufficient
funds.
29. The general rule against vicarious liability in
criminal law underscores that individuals are
not typically held criminally liable for acts
committed by others unless specific statutory
provisions extend such liability. Section 141 of
the Negotiable Instruments Act, 1881 is one
such provision, extending liability to the
company's officers for the dishonour of a
cheque. The appellants' attempt to extend this
principle to section 143A, to hold directors or
other individuals personally liable for interim
compensation, is unfounded. The High Court
rightly emphasized that liability under section
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141 arises from the conduct or omission of the
individual involved, not merely their position
within the company.
30. The distinction between legal entities and
individuals acting as authorized signatories is
crucial. Authorized signatories act on behalf of
the company but do not assume the company's
legal identity. This principle, fundamental to
corporate law, ensures that while authorized
signatories can bind the company through their
actions, they do not merge their legal status
with that of the company. This distinction
supports the High Court's interpretation that the
drawer under section 143A refers specifically to
the issuer of the cheque, not the authorized
signatories.
34. The respondents correctly argued that an
authorised signatory is not a drawer of the
cheque, as established in N. Harihara Krishnan.
This judgment clarified that a signatory is
merely authorised to sign on behalf of the
company and does not become the drawer.
The respondents’ interpretation aligns with the
principle that penal statutes should be
interpreted strictly, particularly in determining
vicarious liability. The judgment in K.K. Ahuja
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further supports this approach, emphasising
that penal provisions must be read strictly to
determine liability.
35. In conclusion, the High Court’s decision to
interpret “drawer” strictly as the issuer of the
cheque, excluding authorised signatories, is
well-founded.”
14. As noted earlier, Section 148 would make it clear
that it empowers the Appellate Court in an appeal by
the drawer against conviction under Section 138, NI Act,
to direct to deposit a sum which shall be a minimum of
20% of the fine or compensation awarded by the trial
Court and the same shall be in addition to any interim
compensation paid by the appellant under Section
143A. When this be the position revealed from Sections
143A and 148 there cannot be any doubt with respect to
the position that the term ‘drawer’ referred to in Section
148 and 143A means ‘drawer of the cheque concerned’.
Ergo, the question is whether the law laid down in the
decision in Shri Gurudatta Sugars Marketing Pvt.
Ltd.’ s case ( surpa ) is applicable proprio vigore in cases
involving the question of liability to pay additional
compensation, as contemplated under Section 148(1),
NI Act. The proviso to Section 148(1) itself makes it
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specifically clear that the amount payable under Section
148(1), NI Act, if the Appellate Court so directs, shall be
in addition to any interim compensation paid by the
appellant concerned under Section 143A, NI Act. It is
nobody’s case that the appellant was made to pay
interim compensation under Section 143A, in relation to
the original proceedings. Be that as it may, the other
question is whether an authorised signatory of the
cheque can be said to be the drawer of the cheque
concerned? We may hasten to add here that we were
not addressed on the question whether the appellant
herein could be saddled with the liability to pay such
additional compensation in terms of Section 148(1) by
virtue of the provision under Section 141, NI Act which
extends liability to the officers of the company for the
dishonour of a cheque and as such, we do not propose
to consider that aspect as it need be considered only
when pointedly posed for consideration based on
proven facts.
15.
There can be no doubt with respect to the position
that Section 143A and 148 empowers the Court trying
an offence under Section 138 and the Appellate Court
considering an appeal by a drawer against his
conviction under Section 138 respectively to fasten
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liability to pay interim compensation and additional
compensation under Section 148(1), as the case may be,
and therefore, the question whether any particular
officer of the company concerned can be made to pay
interim compensation or deposit additional
compensation under the aforesaid relevant provision(s)
would depend upon the question whether he is only a
signatory of the cheque or whether he is the drawer of
the cheque. It is that question with reference to Section
143A, NI Act, that was answered as above in the
decision in Shri Gurudatta Sugars Marketing Pvt.
Ltd.’ s case ( surpa ). In view of the analogicalness of
Section 143A to Section 148, that both the provisions are
under the same Act though applicable at different stage
of proceedings under Section 138 of NI Act and that the
proviso to Section 148(1) makes it abundantly clear that
deposit under Section 148(1) of the NI Act shall be an
additional compensation paid by the appellant under
Section 143A thereof, it can only be said that the
decision in Shri Gurudatta Sugars Marketing Pvt.
Ltd.’ s case ( supra ) is applicable to the extent it holds an
officer of a company who is an authorised signatory of
the cheque issued by a company is not the drawer of
the same subject to what is held in the said decision
Page 16 of 19
with reference to Section 141, NI Act, as relates Section
148 thereof.
16. To wit, as in the case of the position qua Section
143A, NI Act, merely because an officer of a company
concerned is the authorised signatory of the cheque
concerned by itself will not make such an officer
‘drawer of the cheque’ under Section 148, NI Act, so as
to empower the Appellate Court, in an appeal against
conviction for an offence under Section 138, NI Act, to
direct to deposit compensation of any sum under
Section 148(1), of the NI Act.
17. In the decision in ‘ Jamboo Bhandari v. Madhya
Pradesh State Industrial Development Corporation
4
’
Limited and Ors. this Court held that an Appellate
Court in an appeal against conviction under Section
138, NI Act, could not place a condition to deposit an
amount invoking the power under Section 148(1), NI
Act, mechanically without considering whether the case
falls within exceptional circumstances. In view of the
said exposition of law, the Appellate Court ought to
have considered the aforesaid aspects as it would
certainly be an exceptional circumstance to exempt the
appellant who is not the ‘drawer’ of the cheque
4
(2023) 10 SCC 446
Page 17 of 19
concerned to deposit the amount payable under Section
148(1) by an appellant who is the ‘drawer’ of the
cheque. In the case on hand, the High Court has failed
to consider these crucial aspects in the light of the
dictum laid down by this Court in the decisions referred
supra while considering the application for suspension
of sentence for the conviction under Section 138 of the
NI Act in the pending appeal.
18. The upshot of the discussion is that these appeals
should succeed and consequently, it is allowed. The
impugned common order dated 09.01.2024 passed by
the High Court of Karnataka at Bengaluru in Criminal
Petition Nos.13095/2023 and 13153/2023 is set aside.
Accordingly, the orders dated 10.11.2023 passed by the
Principal City Civil & Sessions Judge at Bangalore
respectively in Criminal Appeal No. 1537/2023 and
1536/2023 stands quashed and set aside to the extent it
put the condition to deposit of 20% of the fine amount
payable under orders in CC Nos.13937/2023 and
13938/2013, passed by the Court of XXXVI Additional
Chief Metropolitan Magistrate, Bangalore City and
restore the orders dated 10.11.2023 suspending the
sentence of the appellant in both the cases, with the
condition(s) imposed qua execution of bond and on
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such execution it will remain in force till the disposal of
the above mentioned appeals pending before the First
Appellate Court concerned.
19. The First Appellate Court shall endeavour to
dispose of the appeals expeditiously.
20. The appeals stand allowed as above.
21. Pending application(s), if any, shall stand
disposed of.
.........................,J.
(C.T. Ravikumar)
....................,J.
(Sanjay Karol)
New Delhi;
October 21, 2024.
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